During a virtual press briefing held this week to update the media on the economy, the Governor of the Bank of Botswana (BoB), Moses Pelaelo, had economic diversification and industrialisation in his cross hairs.
Pelaelo had brought President Mokgweetsi Masisi and his cabinet up to speed on the hard facts of the economy the previous day. “First, Botswana’s economy is at a critical juncture where the mineral-led and public sector-led growth model can no longer generate sufficient growth, at least an average of 8 percent per annum over the next 15 years, to address the current development imperatives,” he told President Masisi and his ministers.
Pelaelo said Botswana’s export potential has faltered and shrunk as a proportion of the GDP. “Therefore, there is an urgent need to diversify sources of growth, including redesigning the country’s industrial and trade policies to promote exports in non-traditional sectors, attraction of foreign direct investment specifically targeted and linked to integration into regional and global production value chains, and strengthening export and investment promotion agencies,” he said.
For Botswana to move away from its generational curse of the diamond sector that has in turns spurred and held it to ransom for over five decades, the BoB governor prescribed a panacea for Botswana’s economic ‘sickness.’
He spoke of the need to fully industrialise. “This requires a transition towards sufficient scale of industrialisation to generate a diversified economic base and exports, as well as better articulation of import substitution with performance incentives, the goal being to enhance international competitiveness of domestic firms and fostering productivity gains,” Pelaelo said.
He was speaking against a background of dwindled diamond revenues due to economic recession in the aftermath of the deadly COVID-19 pandemic which started spreading throughout the world in December 2019 when the World Health Organisation (WHO) first received reports from Chinese authorities. Similar to the 2008 global recession, COVID-19 spelt doom for diamonds as Botswana’s main export revenue earner.
But Botswana’s main problem is as old as civilisation itself. Reasons are that over the last 50 years, the country has dismally failed at diversification and did not expand its narrow economic base that is mainly hinged on diamonds.
Driving his point home at the press briefing this week, Governor Pelaelo noted: “Comparative country studies and experiences suggest that deliberate promotion of large scale industries and dedicated implementation of industrialisation policies are instrumental to a successful escape from the middle-income trap and transition to high-income status.”
Many have described Botswana as a classical narration of how precious gems first discovered in dusty sands in 1967 transformed this once desert bowl from being the world’s poorest economy to Africa and the world’s fastest growing economy until 1980 and stagnation of a mono-culture economy to the current decline.
As recently as 2016, Botswana was ranked among the richest countries in Africa. The country’s diamonds contribute up to 40 percent of the world’s total output and more than 80 percent of country’s total export earnings.